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HONG KONG, Aug. 19, 2014 /PRNewswire/ -- The Q2 2014 RICS Hong Kong Construction Market Monitor shows that sentiment is positive in most sectors. Output, employment and profit margins are all predicted to pick up further over the next twelve months. Workloads at the headline level rose further, with the net balance improving from +12 to +23.
Respondents in the private industrial category report that workloads rose fairly strongly, with the net balance moving up to +18 from -20. The worst performing area was energy, oil & gas with the net balance weakening further to -43 from -17 previously.
On average, respondents expect both workloads and employment to increase by between 5% and 7.5%. Respondents also foresee profit margins widening by between 2.5% and 5% over the year to come. A shortage of skilled labour remains the biggest factor inhibiting growth in the sector, with 93% of respondents highlighting this issue as problematic.
In China, financial constraints have been one of the major restrictions on construction activity recently and in Q2 they were the most significant impediment with 83% of respondents reporting problems.
The construction industry in Singapore has faced some challenges. According to the Q2 monitor results, respondents in the private housing category were most negative. Additionally, the picture in the private commercial sector looked weak, with the net balance falling to -14 from +22.
RICS Senior Economist Andy Wu, said: "In Hong Kong, a range of new public and private building projects helped the construction industry expand again last quarter and according to our survey results, respondents are increasingly confident about the next 12 months. However, with many uncertainties currently facing the economy in terms of softer retail sales and trade conditions, there are short-term risks and challenges for the construction industry. Encouragingly, social development remains high on the agenda for the Hong Kong government with plans for improvement and expansion of social housing. As such, we believe the building sector will likely hold up reasonably well for the remaining months of the year, driven by the government's investment in social infrastructure.
In China, the main characteristics of the current market are softness and uncertainty. Construction activity picked up in the second quarter, with some areas of the sector showing encouraging growth. Public capital has certainly played an important role in stabilising the sector. However, we believe the current economic slowdown and the weakness in the residential and commercial property markets are likely to keep growth in construction output low for some time to come. Although there are no strong drivers in the country that are likely to trigger an upsurge in construction activity for the remainder of the year, growth is likely to remain moderate, still largely fuelled by the public sector. While the construction sector inevitably faces continuing constraint in the short term, we believe China should return to strength from a longer-term industry performance perspective given the steady trend of economic growth.
More critically, construction industry is experiencing shortage of specialized labour in Hong Kong and Singapore. Without doubt, the skills shortages will limit production capacity, preventing construction firms from delivering workloads. We believe it is a challenge that is not going to go away anytime soon. Therefore, both governments will have to continue to take appropriate policy measures to effectively address this issue."
Notes to Editors:
1 Headline Net Balance for Total Construction Workloads: An unweighted average of all of the sectors (in net balance terms) covered in the survey.
2 Net Balance: Proportion of surveyors reporting a rise in workloads minus those reporting a fall (if 30% reported a rise and 5% reported a fall, the net balance will be 25%).
About the Survey: The RICS Hong Kong Construction Market Survey is a quarterly sentiment survey of respondents who operate in the construction market sector.
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